Split In Formula One Looming

The Formula One battle being waged in Europe this week could have implications for American fans. (Indianapolis Motor Speedway photo by Ron McQueeney)

By Jonathan Ingram | Senior Correspondent
RacinToday.com

It’s too early to tell if the political stalemate in Formula One between the FIA and its manufacturers will result in new opportunities for U.S. racing participants. Sanctioning bodies like NASCAR or IndyCar, American promoters, teams and drivers could be affected by either a split or a compromise.

The F1 crisis will come to a head with this week’s meeting of the World Motor Sports Council on Wednesday, where both sides in the dispute will be present. If no compromise is reached the teams of Ferrari, BMW, Mercedes, Renault and Toyota will formally split to form their own championship in 2010 in a meeting scheduled for Thursday.

If a split comes to pass, it’s certain that two series will result.

Unlike the FIA, which organizes the F1 championship and is heavily indebted to bondholders, a new manufacturers’ series would be in position sign up the promoters at the Indianapolis Motor Speedway or the Circuit Gilles Villeneuve in Montreal. Those facilities are effectively locked out of the F1 schedule currently by the outrageously high sanctioning fees required to pay off the bond debt of the FIA.

Under a split, teams such as the Charlotte-based USGPE team co-owned by Ken Anderson and Peter Windsor would be sought after by both sides. Theoretically, this new team could participate in the FIA’s championship, where it is currently contracted for 2010, and simultaneously accept an engine contract from one of the breakaway manufacturers as incentive to switch sides in 2011.

In any event, the timing for Anderson’s USGPE team and a potential American driver appears to be good. Even under a compromise and no split, USGPE would be wooed by current manufacturers. Also, the team could anticipate some budget reductions to be put in place in the case of a compromise, which would be helpful to a start-up operation.

The cost of F1 racing is at the heart of the dispute. On one side is Max Mosley, the FIA president who initiated the plan to reduce costs for participants with a budget cap. On the other side is the Formula One Teams Association, led by its chairman Luca di Montezemolo of Ferrari.

In the minds of many, Ferrari is Formula One and vice versa. That’s why the stalemate between the two sides has reached a crisis. In almost every dispute in the recent past, Ferrari has sided with the FIA and against other participating teams. As Ferrari goes, in many respects, so goes the prospects of any world championship for single seaters.

At issue is Mosley’s effort to force teams to either reduce their operating budgets or accept new teams that will run to a different set of more favorable rules by accepting a budget cap. Currently, teams are spending as much as $200 million per season or more and the figure used for a budget cap is $65 million.

Mosley has offered to compromise if the teams agree to sign on for the 2010 season, a contract process that is rarely pro forma but usually gets executed annually by the deadline, now passed. In recent years, Ferrari signing up with the FIA has quelled any insurrection among the other manufacturers on the long-simmering issues of rules and who benefits from the income generated by F1 – the teams or the organizers?

Led by di Montezemolo, this year is unusual in that the participating manufacturers have all banded together to resist committing to a new season. If Mosley agrees to step down in October instead of standing for a new term as president, that will go a long way toward quelling the crisis. Involved in a bizarre sex scandal last year that he believes was orchestrated to chase him from office, master politician Mosley could well pull off the compromise and leave with a more positive legacy.

Part of any compromise would concern a new Concorde agreement, the contract that has bound teams and the FIA together in the past. Currently, they are operating without a Concorde agreement due to a dispute over whether the teams will receive 50 percent of the income generated by F1.

Formula One Management boss Bernie Ecclestone, like Mosley, has antagonized the manufacturers. At the same time the FIA is pushing for lower budgets by teams, Ecclestone is pursuing more income with out-of-sight sanctioning fees, a situation created when he sold the marketing rights to F1 for a hefty fee while retaining control.

That process has further rankled manufacturers as traditional circuits in major automotive markets that draw crowds in the 100,000 range like Silverstone in England, Indianapolis and Montreal are replaced with new ones in the Middle East that are vacant on race weekends or filled with non-paying guests.

How will any of this affect NASCAR or IndyCar? Conceivably, either one or both could gain new manufacturers in the course of events. Honda is already in play for NASCAR as a result of dropping out of F1. On the other hand, Honda currently provides spec engines to all teams in the IRL. If it is joined by more competition in the IRL as a result of the fallout in F1, the Japanese manufacturer is more likely to stay in the IndyCar series and less likely to be interested in NASCAR.

It’s possible that a Ferrari-led breakaway group could suddenly have a total of three events in North America, including an East and West visit in the U.S. to fulfill the manufacturers’ longstanding goal of better exposure for their race teams in the American car market, one that is now more vulnerable to market share increases by foreign brands with the bankruptcies of GM and Chrysler.

3 Comments »

Having been at Indy for the 2005 race (if that could be considered a race) it is my opinion that a team-led organization could not possibly do a poorer job of putting on a race at that amazing facility. I have been waiting for a reason to go an F1 race again.

Also, some teams spend that $200 million per year PER CAR. I think Honda was spending upwards of $500 million for their operation. The cap to $65 million is such a drastic cut that the teams don’t even know what to do about it. How to do you downsize your business by 80% in one year? A little detail left out of Max’s zany proposal.

F1 sanctioning fees aren’t paying off an FIA debt. They’re paying off the bond debt of CVC’s purchase of shares of various holding companies within Bernie Ecclestone’s Formula One Management (FOM). CVC didn’t buy into the FIA; it bought into FOM, which controls the commercial rights of the sport.

Great column by Jonathan. His byline is a great addition to a fine site!